That Star Trek economy thing

Matt Yglesias weighed in to the whole “how does the Star Trek economy work” thing. This followed on a long piece by Rick Webb. I think when it comes to juxtaposing knowledge of economics and knowledge of Star Trek, I am in some position of authority here so I had better put in my two Credits worth.

The argument centres around, is the Federation a market economy or not? It has private property (including businesses), some considerable public expenditure (e.g., StarFleet and that Terrestrial Weather Control system can’t be cheap) and an absence of money for most transactions within the Federation. And then, of course, there are replicators. These essentially convert energy into matter to create any material good you want. It is this last innovation that usually has people unstuck.

The key to thinking about the Star Trek economy is to actually start with the “what happens when many goods become free” issue that was raised by James Surowiecki in the New Yorker yesterday. There is a problem with measurement when it comes to those goods and services. Put simply, the way we measure economic activity is to use the unit of account that is provided by money. However, when products do not involve the exchange of money, we have trouble measuring their worth. At one level, this merely highlights that we have trouble measuring value per se as even non-free goods involve value in excess of their monetary cost, but, at another level, there is a lack of price signals about economic allocation and that makes it hard to work out what is driving resource allocation there.

In Star Trek, most economic value is created by essentially free goods. That is the simple explanation as to why we don’t see money exchanged. That is the point of free. But more to the point, one has to think about how much is free in terms of allocations. Researchers on happiness like Justin Wolfers, in my reading, seem to indicate that once we have about $100 million in wealth (based on today’s goods), that is about as happy as people can get. Marginal utility is effectively zero in wealth beyond that point. In Star Trek, at least the closer you get to Sector 001 (or the Solar System), everyone has what, in today’s terms, would be $100 million or more in wealth. The free goods that are provided from housing to technology to services and to Earth and Earth orbit transportation are what would $100 millionaires can get today. They may be the very same humans who are motivated by wealth acquisition as we have today but the economic problem of “not enough to go around” has been solved up to the level of a saturation point.

The Star Trek world is in the Keynes “Economic Possibilities of Our Grandchildren” era. Scarcity has moved from material goods to other things. For instance, as Ken Arrow pointed out to me 20 years ago when we were having precisely this conversation (!), “the Enterprise is still scarce.” That is, not everyone can have their own starship. Want to do that and you have to control some wealth so you can acquire resources to do that. There clearly is some broad inter-governmental trade that is afforded by larger projects and more advanced technologies and that itself will provide a rational for a Federation-wide medium of exchange — hence, Federation Credits. That such Credits also find themselves into the hands of Federation citizens is also not surprising even if they don’t have to use them except when they go abroad.

So what of the small businesses that apparently the father’s of starship captains disproportionately run? (The other occupations for captain’s parents are either Starfleet admirals or scientists). If this is how those people get money to access the services of their public servant counterparts, then the cost of a French bottle of wine (non-replicated) runs in the millions of dollars in today’s money. In other words, Yglesias and Webb (like many others) seem to mistake simple, long-standing artesian businesses with low revenue. Instead, their long-standing and increasing scarcity implies a much, much higher price. It is just that their wealth isn’t relatively high so they don’t flaunt it.

Of course, this analysis here is really pre-Wolf 359 (the first Borg invasion). Following that and with on-going threats, the Federation turned towards massive allocation of effort towards defence. This is not unprecedented. It did the same likely after the Xindi attack and also classically with the Klingon and Romulan threats leading to less than a century of relative peace. The defence appropriation was enormous. Thousands of starships were produced in a matter of years. That couldn’t have been easy and likely sent ripples throughout the whole Federation economy. In other words, while all this was written in the 1990s, the Federation looked more like a post-911 economy during that era.

There are puzzles though. First, there is a distinct lack of waste in Star Trek. One would expect that there would be more baseline inefficiency given the abundance of material goods and services. Perhaps it isn’t seen as waste because you can’t waste free goods. Second, there is a lack of robots in Star Trek. This is, in fact, as my co-blogger Erik Brynjolfsson would point out, the biggest miss of the Star Trek future. After all, they have great computers capable of AI like holograms and also a highly skilled android but otherwise people are still crawling through jefferies tubes and making their own repairs. Seems implausible. This is where Star Wars seems to have a leg up in the future vision stakes as their are robots everywhere. But Star Wars has always had better economics, it is the political economy that makes no sense.

In conclusion, the Star Trek economy is a well-defined general equilibrium production-exchange economy with a large government presence. It is, therefore, capable of analysis using the tools of neoclassical economics. There is no need to dress it up any other way.

It should be remembered that the Star Trek economy was created by Gene Roddenberry, whose politics were of the far left variety. We also don’t see the real economy — we see the Star Trek military economy and we see a few hints of Mr. Roddenberry’s view of private enterprise — greedy and evil. Where private enterprise is shown it tends to be the “trader” model — an individual or small group going from place to place trading — rather than a corporate model. This is common in science fiction though I doubt its applicability in practice.

Real world economic problems (allocation of scarce resources, even if freely created by replicators) aren’t seen in Star Trek both because most shows deal with an isolated slice of society (largely a star ship traveling to fringe worlds) and because the creator’s politics said that we can create a society where conventional economics doesn’t apply.

Star Trek is about a military star ship from a benign government perspective. The reality of the people on the ground is seldom discussed. That could be because it’s forbidden in some way to say anything negative about the government or it could be that happy stories of home are boring and don’t advance the plot line.

But it is very likely that any privacy allowed is only at the grave of the forces in charge. It would certainly be possible to monitor any, and probably even every, conversation that occurs on the ships.

Star Wars is told from the perspective of the rebels opposing a brutal government. The heros are largely breaking the law and operate on the fringes of society.

As for the lack of robots, in a post Cylon world the presence of too much robotic help could be a weakness because of the possibility of computer malfunction and/or a concern about meeting a more advanced society that can easily defeat computer security efforts.

Spin offs of either or both series told from the other point of view could be very interesting.

Related to the lack of robots, there is a lack of exponential population growth. It seems that reproduction rates remain fairly limited, and of course space travel allows carrying capacities far beyond earth.

But the technologies they have would allow extremely fast population growth, either in synthetic but fully sapient persons, or in biological persons – recall that transporter accidents sometimes copy people, which means they could do it on purpose.

The thing about exponential growth is that it runs into finite resource limits fairly fast, even if those limits are far out. The Star Trek universe had many of these technologies for centuries. By 2400, they shouldn’t have much energy per capita available.

Alternatively, maybe fast reproduction is banned. But I don’t recall a strong, universally enforced ban of this sort. The TNG crew even creates extra computing power for some holo characters that became self-aware to perpetuate their existence. And they all talk about Data’s rights as if none of these issues had come up in their culture before, which means they hadn’t been thoroughly addressed. Add to this that surveillance in Star Trek is far from absolute – we see splinter groups like the Maquis operate against Federation mandates, as well as other criminal activity – and the tendency to eventually grant synthetic persons full individual rights, which means that we can’t assume an implied genocide of fast-reproducing minds happened off-screen between the series or episodes within series.

I don’t think they need reproductive bans. Most of today’s developed nations aren’t having enough children to sustain today’s population, let alone a growing population. While I don’t think we’ll see developed world population collapse in the near future, it’s not clear that rapid population growth will continue indefinitely.

While I enjoy these periodic discussions, I’d like someone to survey all the businesses shown in the show. There are a few scenes in bars, and restaurants for example where the business comes up. They are clearly run much like current restaurants, both with the focus on manual labor and fear that lack of traffic will cause the restaurant to shut down, presumably due to lack of revenue. That implies a conventional currency-for-goods-and-services economy after all. Very confusing, and possibly just the result of it being a TV show, so it’s inconsistent.

No, I see a distinct issue not addressed in Star Trek humans-from-earth commerce…
In that proposed survey of all businesses shown in the show…
Do the doctors talk about their business issues?
Who sells the replicators?
Does anyone have a sewer bill?
Grocery stores are apparently limited to selling to specialty restaurants who offer “real grown food” as a specialty item for those who want to partake of the experience. Does anyone have to shop at grocery stores to meet their basic food needs?

A “conventional” currency-for-goods-and-services economy would involve people having to pay for basic items of human needs.
Like food to survive.
Heating bills.
Sewer & water access.
Communication devices.
Health care services.
Transportation.
These are the essential things that most humans spend a great deal of their money buying for themselves to survive in our civilization.

There’s a lot more to our economy than the casinos, restaurants, and fashion apparel businesses seen in Star Trek.

But why would I want to work…ever…in a Star Trek economy? All I need is a replicator and/or transporter to get whatever and whoever I want.

Of course if either of these devices breaks down, I’ll have a dickens of a time finding a person to repair them. Why would they? They have no more incentive to repair my replicator than I have to help them move into their new quarters at Starfleet Command. (The only place people appear to still have jobs)

The bottom line is that proposed economic systems like this always sound good on the surface (imagine a world with no need, no poverty, no homelessness), but no one can actually figure out how to pay for them. Yes, socialism is a wonderful thing, providing you never run out of OPM (other people’s money).

So you think that everybody is just inherently lazy, only works for money they absolutely need, has no interest in actually doing anything productive. No sense of interest, curiosity, adventure.
You really think humans are very boring I guess, and that intellect is overrated – that base instinct survival is the only thing we’ve got going for us.

People exert themselves or make sacrifices for causes they hold dear, but would the mundane jobs be done, the prosaic products and services still be provided in a world where everyone’s material needs are satisfied no matter what? Do you really think that repairing replicators and helping people move into their new quarters at Starfleet Command (or, by the way, cleaning toilets and waiting tables at Quark’s) satisfy ” the sense of interest, curiosity, adventure” of most people? Can anyone be a Picard?

Certainly janitors, etc. will take pride in their work. The real question is “if you didn’t have to work for a living, would you still do this job?” I took pride in my summer job at a fast food restaurant, but still got the college degree so I didn’t have to do it the rest of my life.

1) It takes an illiterate to miss the distinction between professional pride, which one can feel even hating their job (it is about duty, performance, skill, social utility) and the much fancier “sense of interest, curiosity, adventure” you’d mentioned before. Maybe YOU should talk to some cleaning ladies instead of pretending to speak in their names! They may pride themselves in their jobs, but they work those specific jobs to provide for themselves and their families, one of the dear causes I had mentioned.
2) Pride or not pride, British servants abandoned their masters as soon as industrial progress created jobs with decent pay and fewer nuisances. I guess Picard has a hard time finding people wishing to wash his full dress uniform. I am not saying everyone is at Risa smoking dope and having alien sex, they can just be doing work the free market (i.e. supply and demand) wouldn’t have rewarded them for, but why would anyone not called Riker want to lick Picard’s boots when they can stay at home reading Shakespeare and Surak, writing Holodeck programs or studying Cardassian History?

2) Would someone do janitorial work for EXTRA money – beyond what is needed to survive?
I think the answer is obvious to anyone who strives to make more money than they need to survive. LOADS of people jump through many hoops & take many risks to make MORE than is needed to live modestly but comfortably.

And that’s what we’re talking about here.
That in the Star Trek world – any paid work is “extra” as everyone gets what they NEED.

“Would someone do janitorial work for EXTRA money – beyond what is needed to survive?
I think the answer is obvious to anyone who strives to make more money than they need to survive. LOADS of people jump through many hoops & take many risks to make MORE than is needed to live modestly but comfortably.”
1) We have come a long way from the “sense of interest, curiosity, adventure” talk, haven’t we?
2) Roddembery’s later take on Star Trek tried to do away with money and currency entirely, and his successors enforced the party line, even if half-heartedly. Star Trek IV’s Kirk, Picard and Jake Sisko made it clear that Earth has no currency anymore and humans don’t care about wealth anymore (compare and contrast with TOS’ and TAS’ references to money, wages, coins and personal wealth). How do you think Picard would pay his valet? In fact, “In the Cards” and “Treachery, Faith, and the Great River” (DS9) imply that paying-or bribing- Federation people must be the most awkward and time-consuming process this side of the Bajoran Wormhole.
3) “most cleaning jobs do NOT pay enough for an individual to survive well on, let alone keep a family supported in more than the bare minimum to survive.”
Exactly. People work such jobs in exchange of little more than the bare minimum to survive. It doesn’t mean people can not get used to the job, enjoy their colleagues and so on, but would they have worked them in the first place if they hadn’t to?

[…] 3-D Printers are the future. Companies such as Nike are already using them to radically speed-up their prototype phase and get new shoes to market, and on the feet of elite athletes, even quicker. In the near future the possibilities for this kind of rapid prototyping by big companies, and the ability of smaller companies and individuals to be factories in themselves will definitely have a big impact. In the long term, 3-D Printing is seen by many as an important first step toward a ‘Star Trek Economy‘ […]

[…] Early this week I was reading some fan analyses of Star Trek‘s utopian image of the future. Is a future with no money, where people simply pursue interesting activities in order to better themselves and others, necessarily communist or socialist? I started at this wiki page, and then Raph Koster forwarded me to these two more detailed articles on the subject: The Economics of Star Trek and That Star Trek economy thing. […]

I disagree. It is wholly evident that segments of the Federation maintain entirely different kind of economic models. They have the freedom to do this, because as you say, we’ve moved beyond scarce goods…for about 99.999% of Federation citizens.

When federation citizens engage in non federation commerce they often have to use gold-laced latinum, which cannot be replicated – thus, acting as a perfect inter-galactic medium of exchange. So, right there there is an economic system in place for trade in non federation areas – citizens would have to convert real goods, services, skills, or knowledge to be able to get some latinum to start trading. It is highly suggestive that they use some sort of energy credits (as has been suggested that the ship crew, and supporting crew use).

There is also an entirely different economic system between inter-Federation trade. The price of production, that is, the cost of raw resources plus labor is no longer a factor in value, but novelty is. hand-craftsman ship is. Authenticity is. Keep in mind, value is determined not just by the price of production + labor, but also far far more subjective things such as aesthetic, novelty, or rarity. As such, you can argue that inter-Federation commerce is done more like gift exchange, OR, simply put: prestige. And why can’t one argue that prestige can act as a currency in it’s own right? Certainly it’s been heavily implied that with prestige in Star Trek comes influence, and with influence, more respect and willingness for costly resources to be allocated.

And then there is DS9. No clearer way than to show how the federation deals with commerce: they take a very VERY minimalist approach to it. Sisko left a lot of the commercial aspects to themselves, only keeping track of infrastructure and potentially smuggled goods that are illegal for a wide variety of justifiable reasons.

All these things lead me to conclude the following:

1) the Federation allows, and employs a wide variety of economic models where they are necessary. Communes, syndicates, private property, all these things have been suggested to exist, can exist, and work together simultaneously.

2) The Federation does not need money, since the vast majority of goods, and resources you need will be provided at such a low cost, (near free), however, all are dependent on a scarce resource: energy, to work with. Heavier things, like industrial grade replicators may require tons more energy to produce the things necessary. Yet it can exchange some goods/services/knowledge for currency outside the federation.

3) there is clear motivation for individual citizens to engage in difficult pursuits, and since the motivation is rarely, if ever, monetary, and more than not, humanitarian.

4) In practice (mainly from DS9) the Federation does very little in legislating goods and services, and maintains a fairly minimalist, and security first, orientated approach.

The only model by which we modern humans can apply here: near absolute free markets. I bet a lot of people cringe because that also implies a system by which people “profit” from one another, i.e our modern view of capitalism. Let’s use that model but replace something key here: Capital. Instead of Capital being monetary, or resource based, what if the capital was Human (and I mean that in a more sentient, human and alien way).

Picard’s vineyards let’s say made 100 bottles of authentic, classic wine, that cannot be replicated. These things have inherent value, because they would be reserved for special occasions, delegates, or friends. Those bottles have value, and that value is: enriching one own’s life experience. That value is so subjective, that no government, can assign a real value to it. And in the Federation’s case: why would it want to – all resources to maintain your citizens in a relative state of happiness is essentially taken care of on a minimal scale, the focus is often big picture massive projects.

No socialist system can allow for such things to happen, as a socialist system requires all means of production is owned by the State. It is clear that this is not the case, as the means of production is often left to individual replicators, or individual labor thus, individuals.

Neither it is communist, since private property does exist, so does free enterprise, and the state does not have the authority to allocate human resources (such as labor) where it needs and wants to.

It is Free Market because there is absolutely very few barriers as to how individuals wish to engage in commerce. Yes, there are absolutely the existence of contraband, thus, illegal items, but we’ve only had a small list of those items, and one of the major ones: Romulan Ale, is purely political.